Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board

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7. Financing a. How is the corporation/partnership financing the $xxx,xxx loss incurred by the dealership during the year of audit? b. Are there any loans made between any related entities, business organizations, associations, or individuals? c. Are there any transfers of any assets between any related entities, business organizations, associations, or individuals? d. Are there any transactions, (i.e., a lease; management agreements) between any related entities, business organizations, associations, or individuals? e. Are there any financing and investment interests entered into between any related entities, business organizations, associations, or individuals? f. What does the increase in short term loans represent? g. What does long term loans represent? h. Do any of the related entities, business organizations, associations, or individuals engage in the financing of consumer purchases of automobiles or any aftermarket product whether it be tangible or intangible? (i.e., Vehicles, Mechanical Breakdown Extended Service Contracts, any form of Credit Life Insurance.) i. Could you please provide a list of all bank, financing or investment accounts maintained by all the related entities, business organizations, associations, or individuals? j. Do any of the related entities, business organizations, associations, or individuals maintain any foreign bank accounts? k. Are any reserve, trust, or annuity accounts maintained by anybody, related or not, for any of the related entities, business organizations, associations, or individuals? 8. Books and Records a. Could you please provide a photocopy, to be retained by the agent, of all manufacturers’ yearend statements for all related auto dealerships for the year of audit? b. Could you please provide access to the Manufacturers’ Accounting Manual? c. Please provide photocopies, to be retained by the agent, of the following: 1) Trial Balance A-2
2) Adjusting Journal Entries 3) Tax Classification 4) Chart of Accounts 5) List of Source Codes. d. Determine the adequacy of internal controls. e. Determine the accounting system maintenance cycle: 9. Assets 1) Is the General Ledger prepared monthly? 2) Which subsidiary ledgers are maintained? (i.e., AR, Inventory, CDJ, CRJ, etc.)? a. Did this corporation/partnership acquire any assets during year of audit, other than inventory or other recurring purchases? (i.e., other business, entities, or associations; real estate; exotic autos; boats; planes; club memberships; intangible assets)? b. Could you please provide a photocopy, to be retained by the agent, of the Fixed Assets schedule for calendar or financial year of audit? c. What assets do you personally own? 1) House or houses 2) Club Memberships; Sport Franchises 3) Planes; Boats; Exotic Cars 4) Cash; Other Valuables; Intangibles. d. Do any entities or associations own like kind assets that are made available for your use or that of another officer/partner or significant other participants use? e. Do any officers/partners or other significant participants own any of the assets described above? f. How was the franchise agreement treated? A-3
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Internal Revenue Service Market Seg
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Preface One of the goals envisioned
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Table of Contents Preface .........
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The Reinsurance Transaction .......
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Part 1 General Focus and Procedure
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1. Type A Return Information Schedu
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Percentage has gone down. The incre
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the principal shareholders to finan
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Rents $ 500,000 Interest $ 50,000 C
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Conclusion "Financial status" is on
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Chapter 2 Getting Started The key t
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entities and their purpose and rela
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It is recommended that officer comp
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Chapter 3 Standard Audit Index Numb
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Chapter 4 Books and Records Charact
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c. Reconcile (2): Beginning Trial B
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3 Repair Order Sales 4 Parts Sales
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Conclusion Although intimidating at
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Chapter 5 Balance Sheet Why do we c
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When an adjustment to a balance she
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Part 2 Inventory Chapter 6 General
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. Purchasing c. Handling, processin
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dealerships use specific identifica
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Chapter 7 LIFO Background Overview
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A Short History of LIFO Application
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improper inflation through unwarran
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Introduction Chapter 8 Computing LI
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The double extension index formula
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as one item, there would probably n
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(existing items) and non-comparable
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The current-year costs that can be
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Assuming the dealership elects LIFO
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matching of revenues and costs. Thu
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section 1.471-9. Both of these regu
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providing to the credit subsidiary
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Under elections made prior to Decem
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Base Year Cost 9112 $224,000 You ha
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BLS Sanity Check A simpler means to
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CYC = Current Year Cost. This is th
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Computation of 1993 Increment and R
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Specific Identification Increment M
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which may be identified by a unique
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Step # 3 For each item category, ad
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Step # 10 Compute the total cost of
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1991 Inventory Value at Current Yea
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Dealers may offer the contracts as
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2. Principal/Obligor A principal is
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Rev. Proc. 97-38 provided for an al
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Contract Construction Generally, a
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Rev. Proc. 97-27 provides the admin
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The Court ruled that when the deale
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Considerations for Forming a Produc
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The Reinsurance Transaction To illu
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insurance contract reinsured throug
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(1979). The Service’s position is
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While not all captive situations in
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3. IRC section 845 tax avoidance 4.
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section, seemingly compliant arrang
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2. By owner A dealer may own dealer
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Rules and Regulations Many rules re
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Page 129 and 130: One of the assets specifically iden
Page 131 and 132: Where a covenant may be enforced it
Page 135 and 136: 1. Spread income over a number of y
Page 137 and 138: RELATED FINANCE COMPANY CHECKSHEET
Page 141 and 142: 3. Question the taxpayer directly w
Page 145 and 146: Technicalities Under the provisions
Page 149 and 150: Cash 300 Accounts Receivable 300 2.
Page 151 and 152: The dealer sells the note to a fina
Page 153 and 154: For purposes of this rule, an "empl
Page 155 and 156: 10) relationship of stockholder-off
Page 157 and 158: purely for services. See Treas. Reg
Page 159 and 160: Howard Sole, Inc. v. Commissioner,
Page 161 and 162: Milford Motor Co. v. United States,
Page 163 and 164: new pool for additional, subsequent
Page 165 and 166: 6. The finance company is entitled
Page 167 and 168: when the back-end distributions are
Page 169 and 170: The transfer of the installment con
Page 171 and 172: Report as a Loan or an Assignment
Page 173 and 174: Reported as a Sale… (How it Shoul
Page 175 and 176: Other Sources of Information IRC se
Page 177: Part 4 Appendices Appendix A Initia
Page 181 and 182: k. Do you receive rebates from anyo
Page 183 and 184: f. Employee Benefits 1) Form 5500?
Page 185 and 186: Appendix B Balance Sheet Section -
Page 187 and 188: . Dealership financing If the deale
Page 189 and 190: f. Dealer Reserve Holdbacks 3. Inve
Page 191 and 192: Once the existence of a shareholder
Page 193 and 194: Despite the fact the computation ma
Page 195 and 196: corporate minutes if material. d. L
Page 197 and 198: Appendix C Definition of an Item Co
Page 199 and 200: two cars of the same model can vary
Page 201 and 202: Appendix D An Analysis of the Wrigh
Page 203 and 204: (D) also moved (DLRS) income to be
Page 205 and 206: The court did not allow (D)’s cla
Page 207 and 208: Appendix E Glossary The following t
Page 209 and 210: FIFO: An inventory cost flow assump
Page 211: PLATFORM: A vehicle platform is the
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Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board

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